ITR Business Code for Share Trading and F&O Trading

ITR Business Code for Share Trading and F&O Trading AY 2025-26 onwards

Taxpayers engaged in share trading or futures and options (F&O) trading must report income correctly in the Income Tax Return (ITR) to stay compliant and avoid notices from the tax department. Prior to AY 2025-26, there were no specific business codes for these activities, causing significant confusion. Many used generic codes like 09028 (“Retail sale of other products n.e.c.”) or 13010 (“Investment activities”) for reporting income from F&O or share trading under the head “Profits and Gains from Business or Profession” (PGBP).

For the Assessment Year (AY) 2025-26, the Income Tax Department has introduced specific ITR Business Code for Share Trading and F&O Trading to streamline ITR filing. Let’s understand the basics and newly introduced codes.

1. Futures and Options (F&O) Trading:

   • Tax Treatment: F&O trading is classified as non-speculative business income under Section 43(5) of the Income Tax Act. Profits or losses are reported under PGBP in ITR-3. Income is taxed at slab rates (0% to 30%), and losses can be set off against other business income (except salary) and carried forward for up to 8 years.
   • Turnover Calculation: Turnover includes the absolute sum of profits and losses from trades (e.g., ₹10,000 profit + ₹8,000 loss = ₹18,000 turnover).
   • Tax Audit: Mandatory if turnover exceeds ₹10 crore (or ₹3 crore if opting out of presumptive taxation and profits are less than 6% of turnover) or if income exceeds the basic exemption limit.

2. Intraday Share Trading:

   • Tax Treatment: Intraday trading is treated as speculative business income under Section 43(5). Report it under PGBP in ITR-3. Losses can only be set off against speculative income and carried forward for 4 years.
   • Tax Audit: Similar audit rules apply as for F&O, based on turnover and income.

3. Delivery-Based Share Trading (as Business Income):

   • Tax Treatment: If you frequently trade shares with delivery and treat it as a business, it’s non-speculative business income, reported in ITR-3. If treated as an investment, it’s classified as capital gains (short-term or long-term) and reported in ITR-2/3, in which case no business code is required.
   • Deductions: Traders can claim expenses like brokerage, internet, and Securities Transaction Tax (STT).

New Business Codes for AY 2025-26:

To address past confusion, the Income Tax Department has introduced the following ITR Business Codes for Share Trading and F&O Trading: